Markets trim their early gains; around 2% drop in Chinese index weigh on sentiment

The domestic equity markets trimmed their early gains in late-afternoon trades as down-tick of around 2% in China's Shanghai Composite spread jitters across local equities. Though the local markets were holding their neck in the green but they were off their intraday peaks. Subdued US index futures in screen trade also weighed on sentiment. Back home, the BSE's 30-share Sensex and the NSE's 50-share Nifty were trading marginally above the crucial 20,100 and 6,000 levels, respectively. Metal, public sector undertaking and fast moving consumer goods counters were causing maximum damage to the bourses at this point of time while healthcare, consumer durables and software stocks were showing some strength in trade. The broader indices were also off their early highs but continue to outperform the benchmark indices. The market breadth on the BSE was positive; the gainers thrashed the losers in a ratio of 1604:1145 while 101 shares were unchanged.

The BSE Sensex was up by 36.90 points or 0.18% at 20,110.56. The index touched a high and a low of 20,190.13 and 20,062.60, respectively.

The BSE Mid-cap and Small-cap indices increased 0.30% and 0.58%, respectively.

The main gainers in the BSE sectoral space were Healthcare (HC) up 0.92%, Consumer Durables (CD) up 0.76%, Information Technology (IT) up 0.58%, Capital Goods (CG) up 0.51% and Realty up 0.41%.

On the other hand, Metal down 0.83%, Public Sector Undertaking (PSU) down 0.13% and Fast Moving Consumer Goods (FMCG) down 0.10% were the only losers in the BSE sectoral space.

Meanwhile, industry body ASSOCHAM has said that as tight liquidity scenario, rising demand for credit and high inflation will cause interest rates to inch up in 2011 even as the Indian economy grows at a rapid pace. There is already some upside bias in rates in wake of very tight liquidity scenario currently prevailing in the system and the upward bias is likely to continue remaining there in the system in next calendar year as well.

Overall liquidity has remained in the deficit mode in Indian banking system since mid-September with average daily injection increasing significantly in following months. In order to alleviate frictional liquidity pressure, the RBI has taken a host of measures, but things remain tight for now. Although the deficit mode in the LAF window has been consistent with the tightening of policy stance by the central bank, even the RBI has accepted that too much negative liquidity was impacting banks. Economists feel that if the scenario continues in 2011, banks will have to hike rates.

The industry body feels that even as the central bank has considerably tightened its monetary policy over the current fiscal so far, inflationary pressures continue to put pressure on the Reserve Bank of India (RBI). Most analysts expect that the RBI will hike policy rates in the forthcoming quarterly review in January after having taken a pause in the December review.  The major gainers on the Sensex were DLF up 1.31%, ICICI Bank up 0.98%, TCS up 0.86%, Tata Power up 0.82% and BHEL up 0.71%.

The major losers on the index were RCom down 2.75%, Sterlite Inds down 1.68%, Reliance Infra down 1.51%, Tata Steel down 1.18% and Bharti Airtel down 0.99%.

Total refinery output in the country continued to decline in November too, marking fourth straight decline on year-on-year basis. The lower output in November was mainly due to some repair works at Reliance Industries' plant. The production from state run refineries however registered marginally growth over the month under review.

Average domestic refinery output in November 2010 stood at 3.16 million barrels per day (bpd), down nearly 3.7% compared with the same month a year ago. However, the decline was lower than that seen in the previous month at 4.8%. There is some hope that the trend may reverse in next month and output in Dec 2010 may be higher than the year-ago period.

The S&P CNX Nifty advanced 8.95 points or 0.15% to 6,020.55. The index touched a high and a low of 6,045.75 and 6,012.60, respectively. 

The top gainers on the Nifty were Ambuja Cements up 2.38%, Dr Reddy up 2.03%, Sun Pharma up 1.27%, DLF up 1.27% and ICICI Bank up 1.22%.

The top losers on the index were SAIL down 3%, RCom down 2.75%, Sterlite Inds down 1.87%, RPower down 1.74% and Rel Infra down 1.68%.

Other Asian markets were trading mostly in the green. Jakarta Composite gained 0.13%, KLSE Composite rose 0.01%, Nikkei 225 advanced 0.75%, Straits Times climbed 0.51% and Taiwan Weighted increased 0.35% while Shanghai Composite shed 1.90% and Seoul Composite declined 0.37%. 

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